Homebuilders cautiously optimistic as construction permits rise

Thursday

Jan 31, 2013 at 12:01 AMJan 31, 2013 at 11:40 AM

At the peak of the housing boom, more than 10,000 homes a year were built in central Ohio. Last year, 2,558 were. So why are homebuilders smiling? Because - for the first time in a decade - things are looking up.

Jim Weiker, The Columbus Dispatch

At the peak of the housing boom, more than 10,000 homes a year were built in central Ohio. Last year, 2,558 were. So why are homebuilders smiling? Because — for the first time in a decade — things are looking up.

Last year, builders secured 21 percent more building permits for single-family homes than in 2011, the first meaningful increase in a decade, according to Binns Real Estate Services of Columbus. In addition, condominium construction rose 5 percent from 2011 to 2012.

More jobs, low interest rates and rising rents are helping drive home construction. The improving market also means that homeowners are finally able to sell their homes, allowing them to buy a new one.

Despite last year’s gain, home construction is a long way from the boom years and even what is considered normal in the Columbus area: 4,000 to 5,000 homes.

“Last year was a good uptick, but we’re coming off a low base,” said Keith Tomlinson, president of Dominion Homes, which obtained 470 permits last year, up from 327 the previous year.

Tomlinson and other builders are encouraged by the numbers but know they represent just the first step out of a deep hole.

“Given that interest rates are 3.25 percent, you’d think there would be a line around the corner to buy homes, but that isn’t happening,” said Charles Ruma, president of Virginia Homes and this year’s president of the Building Industry Association of Central Ohio. “Still, we’re absolutely encouraged to see a 12-month gain in housing numbers.”

Central Ohio’s growth in home starts is lower than the nation’s. U.S. home starts jumped 28 percent last year, according to the Census Bureau and the U.S. Department of Housing and Urban Development.

For homebuilding to fully recover in central Ohio, it needs not only continued job growth but also to overcome a few specific barriers.

Raw-material prices have climbed significantly in the past year, builders say. Lumber, for example, is now $400 per 1,000 board feet, up from $279 a year ago, according to Random Lengths, which tracks lumber costs.

But the biggest problem might be a potential shortage of developed land on which to build. Few subdivisions were started as housing fell through the basement.

Most of the homes built in the past five years have been built on land platted during the boom. Since 2008, 11,460 homes were built in central Ohio, but only 4,301 lots were developed, Binns reports.

Now, as construction starts to heat up again, those lots are harder to find.

“Nobody has been interested in developing because of the costs and risks involved in a down market,” Ruma said. “Getting developed lots are gold right now.”

That could mean a rise in new-home prices. The average new home in central Ohio sold last year for $259,693, up slightly from the previous year. But homebuilders say they expect prices to rise about 5 percent this year because of increases in land, labor and material costs — and because demand can support it.

Also helping builders is a sharp decline in the number of existing homes for sale.

Kimberly and Joseph Arcoleo looked to buy an existing home after moving to Columbus from Arizona in 2011. But after failing to find a ranch with an open floor plan, the couple decided to build a home with Virginia Homes.

“We’re empty-nesters and loved being in a single-level home,” said Kimberly Arcoleo, who works at Ohio State University.

“Except for condos and patio homes, there weren’t many newer homes on a single level, so I started saying, ‘If we’re going to have to spend to renovate, why don’t we see if there’s a builder that offers a single-level plan?’”

Over the weekend, the couple moved into a new three-bedroom ranch at Tartan West in Dublin.

“We’re absolutely happy with our decision,” Arcoleo said. “Even though we don’t have any TV yet, we really like it here.”